1. Economists are predicting that Canadian inflation rate will be 4% next year. If the Canadian real rate of 2.5%, what is the nominal rate for the country. [Use the precise formula]
a) 4%
b) 2.5%
c) 6.6%
d) 6.5%
2. The current spot exchange rate between the Australian dollar and the Euro is AUD 1.583/EUR If the interest rate is 6% in Australia and 2% in the eurozone, calculate the spot rate one year from now. Use direct quote, with AUD as the home currency.
a) AUD 1.678/EUR
b) AUD 1.522/EUR
c) AUD 1.649/EUR
d) AUD 1.615/EUR